Wall Street Bankers May Have to Join the 99%
On Wall Street, there’s some feeling that things just aren’t what they used to be.
The industry that many allege played a fundamental role in the financial crisis is now dealing with the ramifications of the meltdown, albeit in its own way. The prospect of smaller profits combined with public ire over banker pay — including that from the Occupy Wall Street movement — means that many in the finance industry are saying they believe that the culture of huge bonuses and paychecks may be over forever, at least according to one ex-Lehman banker.
“The feeling is compensation is never really going to come back, which is something entirely new,” the anonymous ex-Wall Street worker told New York Magazine as part of their Workplace Confidential series. “After the tech bubble, no one questioned it wouldn’t come back. We all knew it would. Now it’s different. It’s just no fun.”
And adjusting to the new normal could be extremely difficult for some Wall Street workers. Another anonymous former finance industry worker told The Guardian as part of a similar series that they were easily able to alter their life to fit new income realities after taking a job as a mergers and acquisitions analyst at a bank in London.
“This was a lesson: it doesn’t really matter how much you make, because your lifestyle and expectations move up with your income,” the former analyst said.
Though that’s only the perspective of a couple of people in the finance industry, it’s likely that other Wall Street workers are feeling similar pain. After a year that included anxiety about the weak global economy, slow deal-making, new financial regulations and public anger aimed at financial institutions, banker compensation is on track to be at its lowest level since immediately following the financial crisis in 2008, the Wall Street Journal reports.
Banker bonuses are also slated to drop by at least 20 percent, according to most predictions, though estimates vary. In addition, Credit Suisse will likely suspend its practice this year of automatically increasing pay for junior workers, Bloomberg reports. Other financial institutions are closely watching banks such as Goldman Sachs and JPMorgan Chase to see if they’ll also shift away from what’s considered the industry norm.
Unless the banks all change their compensation policies at once, the ones who do could suffer from a talent drain as employees leave for other banks that are paying more. [“Talent drain”? Unpaid college interns could probably do their job, without totally wrecking the economy] Brokerage executives at Jefferies Group have threatened to leave the company if their bonuses aren’t up to snuff with other Wall Street firms, according to the New York Post.
While Wall Street pay may be down, banks’ ratio of compensation-to-revenue is likely to go up. At Goldman Sachs, compensation as a share of revenue is slated to go up to 44 percent from 39.3 percent, according to the New York Times, a trend that is common during tough economic periods.
